Friday, January 13, 2012

You Have Less Money Than You Think

According to Money magazine, 78% of
us will have a major unexpected event within the next ten years.

This hit me a few months ago.
Several things hit my finances hard all at the same time. I had 3
tenants that moved out all at once, taking their security deposits and my
previously expected next month's worth of incoming rent with them ($1675 +
$1675 = $3350). I also found out that I needed to replace two tires on my
vehicle ($710). Two large trees on my property had roots growing into my
plumbing system and needed to be cut down with the roots ground ($650).
Oh yes, and property taxes were due ($6636). This all set me back
several thousands of dollars all at once. I dug into my savings, put some
purchases on credit, and lived extremely, humbly, below my means for 2 months.

I didn't think it was possible, but we
cut costs mercilessly like maniacs to make ends meet. I made some drastic
changes to my lifestyle and finances, which I will detail in another post.
Most importantly to me, I didn't break the cardinal and fundamental rule
of credit cards - I did NOT carry any little bit of unpaid balance over.
It was a humbling and necessary experience.

It taught me how wasteful and
spendthrift I used to be. It taught me that I was capable of living on
a lot less.

The point is that emergencies will
always happen. It could be new tires for your car, annual property taxes
on your home, DMV vehicle registration fees, car maintenance, home repair,
medical or dental emergencies. It could be smaller amounts like auto insurance
premiums or life insurance premiums due.

These are things that will come out of
nowhere. These are the things that you should plan for. These are
the things that will quickly drain the amount of money we THINK we have.

Ask yourself:

- Do you have money set aside to pay
all of your bills when they are due all at once?

- Do have $1000 set aside as an
emergency fund?

- Do you have 3 months living expenses
set aside as an emergency fund?

- Do you have 6 months living expenses
set aside as an emergency fund?

- Have you started your retirement fund
yet?

I will teach you how to prepare
yourself for these emergencies and financial necessities.

In the meanwhile, realize that your
actual worth is more than just your bank balance. It includes all the non
monetary wealth that you already have. It includes your family and
friends. It includes your skills, talents, health, potential future
earnings, and your mind. All of which makes you wealthier than you can
imagine.